In this article, we will discuss business interruption losses in further detail. As we have said, specific property loss is sometimes just a piece of the overall loss. Lack of earnings due to interruption of business operations can be huge. These types of losses can be discussed and separated into 3 categories:
- BI insurance is designed to give compensation to the insured for lost income during a business building restoration period or the time necessary to restore the damaged property.
- “Extended” provides coverage, usually for a certain period of time, for lost income after the property is restored and before the income returns to the levels before the loss occurred… and to the level where the income would have increased to, but for the interruption of the covered loss (if income was on an “up-swing”).
- “Contingent” is coverage for the insured’s loss of income resulting from physical damage to a property of suppliers or providers that are critical to the products and / or services of the insured business in question.
Often, coverages such as those in #2 and #3 are purchased as extensions of the basic business interruption coverage. To obtain BI coverage usually requires a round of research to determine business loss valuation. Insurance companies do this in order to establish a premium, and in order to have a starting point for what would be paid out in the event of a loss.
Typical activities of this research would include:
- A projection of what the business will do in a 12 month period
- The components of the business: fixed and variable labor costs, materials, capital goods and fixed assets
- Cost of money (cash on hand, financing, cash flow evaluations) This is a short look at business interruption losses. The variations and extent of losses can be quite unique and extremely complex.
So, it is VITALLY important that you choose an experienced, professional, licensed Public Insurance Adjuster who will truly represent YOUR interest, FULLY.